With backs against the wall, Swain hikes taxes

Swain County commissioners last week tentatively agreed to increase the property tax rate by 3 cents to cover a budget deficit — the first property tax increase Swain has seen in more than two decades.

Despite raising property taxes, the county’s budget this coming year will still be less than last year — about $500,000 less. The hike in property taxes will help offset a loss in other revenue.

The county was facing a $1.2 million shortfall due to declines in various state and federal revenue streams. Cutting the budget by a full $1.2 million would have been too severe, commissioners concluded. Likewise, raising property taxes to cover the full $1.2 million shortfall would have meant a sizeable property tax increase of more like 8 or 9 cents.

Instead, the county more or less split the difference.

It will cut the budget by $500,000, and raise property taxes 3 cents to bring in $400,000. The county will tap its interest earnings from the North Shore Road cash settlement account to make up another $300,000.

“This year has been particularly difficult,” said County Manager Kevin King, who called a tax increase “inevitable.” “The revenues are tremendously decreased.”

King presented a draft version of a budget to the county commissioners last Thursday as well as five different options for closing the budget gap.

The county’s tax rate is now 33 cents per $100 of property value. Starting July 1, that will rise to 36 cents.

“I am for the 3 cent increase myself, if that will get us out of hot water this year,” said Commission Chairman Phil Carson.

Swain has historically skirted the brink with its budget. Its fund balance reserves dipped so low a few years ago it triggered fiscal warnings from the state. The county had no fat to fall back on or margin of error when its back truly got up against a wall.

All five commissioners repeatedly stated that they didn’t want to raise taxes, but it couldn’t be avoided, they said, unless they wanted to cut necessary services.

“I don’t want to cut services. I don’t want to cut jobs,” said Commissioner Steve Moon. “It’s not a pleasant thought to raise taxes. We’ve got to balance the budget.”

King presented a worst-case scenario, of what cutting the budget by $1.2 million would look like. The county would have to eliminate 20 jobs, including four from the Sheriff’s Office, two from the Department of Social Services and one from emergency communications. It also would have cut thousands from the fire department and county schools.

“What can you do? You have to do something,” said Commissioner Donnie Dixon.

The board blamed the $700,000 budget deficit on declining revenues and increased expenses. King said that the county will lose $120,000 next fiscal year because of federal funding cuts. Swain County, along with others in North Carolina, has also seen declines in state funding. The county must now use its own money to make up for the loss of federal and state revenues.

“They are cutting small counties’ throats. They are killing us,” Dixon said.

Meanwhile, Swain County will not see a boost in tax revenue from its recent property value assessment to help cover any of the lost funds.

“There are a lot of different things hurting us at the same exact time,” King said.

Swain County just completed an countywide assessment of property value, both commercial, residential and land. Not knowing what to expect, King held off on finishing the budget to see how property values fared.

While property values didn’t fall at least, they likewise didn’t go up — so the county didn’t see a windfall from increasing property values. Property values, on average countywide, held more or less steady since 2005.

While the county’s property tax base has gone up by 16.5 percent since 2005, those were small incremental additions to the tax base from new construction coming on line and being entered on the county’s tax rolls — rather than a sizeable jump tied to the revaluation.

Coming to Swain’s rescue — by lessening the blow of budget cuts and of property tax increases — is the interest from the cash settlement fund. The government agreed to pay Swain County $52 million for breaking its promise to rebuild a road flooded during the creation of Fontana Lake in the 1940s. The whole amount may be pie in the sky, but the county has so far gotten $12.8 million, was placed in a state-held trust fund. Once a year, Swain County can withdraw the accrued interest to use as it wishes.

Although the property tax increase and a nearly $300,000 appropriation from Swain County’s settlement fund are expected to get the county through next fiscal year, county leaders may have to come back to the table later this summer and look for more solutions to its budget woes.

The county won’t know until August if there is enough settlement interest money to equal the $280,000 it has incorporated in the budget.